Sen. Elizabeth Warren castigated student loan servicing companies like Navient on Tuesday over what she characterized as deceptive "traps" being laid for federal student loan borrowers in the wake of President Joe Biden's recent announcement to cancel up to $20,000 in such debt.
"While families breathe a sigh of relief, corporations that made billions off a broken student loan system are now busily laying new traps in a shameless, last-ditch effort to try to line their pockets," Warren (D-Mass.) said during a hearing of the Senate Banking, Housing, and Urban Affairs Committee.
In an exchange with Rachel Gittleman, the financial services outreach manager for the Consumer Federation of America, Warren detailed that some borrowers who are customers of Navient—who the senator referred to as "one of the world's largest and worst loan servicers"—had recently received offers from the company to refinance their federal loans into lower-interest loans with NaviRefi, the company's private loan arm, but only disclosed in the fine print of the agreement that this could lead to disqualifying from Biden's debt cancellation plan.
While noting that it remains unclear which borrowers and how many received these notifications, Warren said that "instead of sending borrowers information to help them get the cancellation that they be entitled to, Navient pushed borrowers towards loans that could, at best, complicate their ability to get cancellation."
Warren then asked Gittleman if companies like Navient make more or less money if student borrowers who use their services receive debt cancellation.
"The future of Navient's lending business depends on its ability to take the most credit-worthy people with federal student loans and refinance them into private loans," responded Gittleman. "Every borrower who is debt-free as a result of President Biden's action is one fewer prospective customer for Navient."
"More broadly," she continued, "the better the deal the federal government offers borrowers with federal student loans, the less opportunity Navient has to sell people its private loans."
Warren said this was "outrageous behavior" by Navient, which is why she has asked the company and other student loan servicers in the industry "what steps they're taking to ensure that consumers receive timely and accurate information about their loans and their eligibility for cancellation."
Earlier this week, Warren joined Rep. Ayanna Pressley (D-Mass.) in a letter to Navient CEO John Remondi asking him to explain reporting about the company's recent conduct and alleged attempts "to scam borrowers out of student debt relief by encouraging them to refinance their loans" with NaviRefi.
The two lawmakers called on Remondi to provide answers to a list of key questions about the issue with a detailed and full response no later than September 26.
"We're putting the servicers on notice," said Pressley in a statement on Monday. "It's imperative that servicers provide borrowers with accurate and up-to-date information on their student loans."
"Thanks to President Biden's plan to cancel student debt," she continued, "millions are now eligible for meaningful student loan debt cancellation and we need to ensure it is administered efficiently and felt by as many people as possible. Senator Warren and I want answers."